Credit Card App Advice from a Senior VP of Credit Approval & Risk

Three weeks ago, I happened to be on a CSA flight from Prague (PRG) to Nice (NCE), randomly seated next to a Senior VP, Credit Approval & Risk, at one of the largest US card issuers. Guess what? He also turned out to be a huge mileage junkie! We got to talking about our favorite flights, cabins, destinations, hotels, redemptions, etc., everything but credit cards. As nice as he was, I could not pass up the opportunity to ask him some direct questions about one of our favorite mileage earning activities – credit cards. He politely asked if I could send an email to his personal account with some questions, rather than discussing them on the flight. Below you will find part one of our email conversation including applications, multiple pulls, and score determinants. Tomorrow, part two will include the impact of canceling cards and predictions on the future of sign-up bonuses. Part three will include reader questions, see the bottom of this post. If your not new to the hobby, a lot of his responses are nothing new, but it is nice to finally have some off-the-record confirmations.

  1. What happens to my credit score when I apply for a card? I think the frequent flier community is actually very well educated on this subject, but here’s a quick summary. Depending on the geographical area, we pull a credit report from one or two potentially separate credit bureaus resulting in a hard inquiries on your credit report. Even in my current position, I cannot tell you the actual impact of these inquiries (it’s a hidden algorithm by the bureaus), but what I do know is that these inquiries will impact your score by lowering the average age of your accounts and increasing the amount of “new credit” on your report. Based on publicly available FICO information,  new credit accounts for 10% of your score while length of credit history accounts for 15% of the score. These are the two areas most impacted by a new application, however (and good for you guys) they are actually two of the smaller sections of the overall credit score pie. Payment history makes up 35% of the score, amounts owed 30%, and types of credit 10%. Generally speaking, expect a drop of 2-6 points per application in the first 30 days. However, remember that with your new application, you’ll be positively impacting your “amounts owed” sub score (additional credit granted to you results in a lower overall utilization if you’re not spending any more than you were prior to the application). You’ll also be positively impacting your score if you make timely payments on the new card. When all of these are taken into consideration, that 2-6 point drop reduces to 2-5 points after 90 days, 2-4 points after 180 days, and generally continues dropping until the two year mark when it will be completely removed from your score.
  2. Does applying for multiple cards on the same day lessen the impact on my score and make me more likely to get approved? Let’s start with the likelihood of approval. Without getting myself into too much trouble, the short answer is that it depends. If you are someone with a strong score that we are likely to approve, then the answer is Yes. Our automated systems review several factors prior to that automated decision you receive on the website. One of the criteria is the number of recent applications. By applying for multiple cards at the same time, you are reducing the likelihood that we will see (via our credit agency reports) that you have also applied for other cards. This is due to a time lag. I can tell you that if we do see them, they’ll often result in a denial of credit regardless of your score. Now, if you are someone who is never approved automatically (name or address discrepancies, etc.), applying for multiple cards on the same day will hurt you. The reason for this is that we will pull an updated report (though you won’t receive an additional hit) when your  application begins level two processing (non automated approval) and we will then see your multiple requests for credit (a big No No for us in such a short period of time). In terms of applying for two of our products on the same day, sometimes you’ll see one credit pull while other times you’ll see multiple. It all depends on the credit agency and whether they label our pulls as duplicates. Expect one for each application and be grateful if they are combined. That’s all I can say about this one…

Related – What’s In My Wallet? Current Credit Card Offers

Part two coming tomorrow!

For part three (reader questions), feel free to include additional questions in the comments section of this post and I’ll pass them along.

Pingbacks

Comments

  1. One question I have that nobody seems to know the answer to is when you can get rid of an old card, e.g. say I have a Sapphire that I’m going to keep forever, but its only two years old. And I have an Amex that’s 10 years old. Can I cancel the Amex? How about if the Sapphire is 5 years old? Etc. Does it matter if I have another card that is 5 years old?

  2. “that 2-6 point drop reduces to 2-5 points after 90 days, 2-4 points after 180 days, and generally continues dropping until the two year mark when it will be completely removed from your score.”

    I don’t get it. It seems the score keeps dropping within the two year frame. What time would the score goes up? Given the fact that one has a good credit score and always makes minimum payments on time.

  3. ” The reason for this is that we will pull an updated report (though you won’t receive an additional hit) when your application begins level two processing (non automated approval) and we will then see your multiple requests for credit (a big No No for us in such a short period of time)”

    This is why you apply in the morning and call all the reconsideration departments for all the cards on the same day.

  4. OK, this may seem obvious to some of you, but I would like to hear:

    1. What is the card issuer’s view of “churning” – repeatedly applying/cancelling/reapplying for the same card to receive multiple sign-up bonuses? Do the issuers try to stop this if they see it going on, or do they just ignore it as a fringe issue/cost of their business model?

    2. Since most issuers seem willing to issue multiple cards to an individual, it seems that the issuers are encouraging a “portfolio” approach to such customers in the hope of capturing more of their business than they might otherwise. Can you comment on this?

  5. My question is about piggybacking! Does it matter how old you are? I understand it has to be within the family because people used to sell piggybacking services, but is there an age limit? Additionally, does the person piggybacking have to report their ssn for this CS benefit? I’ve added my brother to my CSP, but they didn’t require a ssn. I WILL LOVE YOU FOREVER if this can be answered thoroughly!

  6. Great journalism thanks. I am also immensely impressed that there isn’t one single credit card referral link in this post. Most mileage bloggers would manage to put in at least 3 links in this.

  7. Great post! I have a question if I may? In this day and age when banks are actively trying to recruit new customers with generous sign up bonuses; why do they penalize you when you take them up on the offers? In other words, assuming someone has a flawless credit history, high FICO, 100% on time payments (in my case for over 25 years)why do they deny you a credit card just because you took up some of these offers from other banks?

    One more question: (I know Chase has a referral special going on now) Why do banks assume large blog owners produce the best new customers? In most cases, they give links to high-traffic blogs who encourage people to churn the cards. I intend to use Chase’s offer to recruit my friends and family, maybe my readers too. I wish other banks would give the same opportunities.

  8. “The reason for this is that we will pull an updated report (though you won’t receive an additional hit) when your application begins level two processing (non automated approval) and we will then see your multiple requests for credit (a big No No for us in such a short period of time)”

    Very interesting…

  9. Most of the information in regards credit scores and reports is pretty well available on the web. I find income criteria more mysterious. I have several friends and relatives with excellent credit scores & reports rejected for too little income. I have been very fortunate to have a quite large income for the last few years and suddenly no longer get automatic approval when putting down the correct income. I always got automatic approval when my income was more upper mid-range.

Leave a Reply

Your email address will not be published. Required fields are marked *